Equens - EQ Magazine by Total Identity

sharing insights Equens magazine | 03 | July 2012

INNOVATION PROCESS AND SOUNDING BOA R D

SHARING INSIGHTS, INSPIRING MINDS, CREATING FUTURES HOW BANKS CAN M A K E PAYM ENTS PAY

DEVELOPING NEW PAYMENT PRODUCTS THAT OFFER CUSTOMERS ADDED VALUE SINGLE EURO PAYM ENTS A R EA

THE INS AND OUTS OF THE FINNISH MIGRATION TO SEPA

TRADITIONAL PAYMENTS VERSUS RADICAL CHANGE WHERE TO FOCUS?

EDITORIAL

CONTENT

The balance between compliance and innovation TR ENDS – OPPORTUNITIES IN THE DIGITAL WORLD

Exciting and challenging times! On the one hand, the SEPA end date is rapidly approaching. On the other hand, technological developments and new customer needs are offering a wide variety of opportunities for the European payments community. The challenge is to find the right balance, as compliance and innovation are not a matter of ‘whether – or’, but of ‘and – and’! In the new edition of our EQ Magazine, this dilemma is being dealt with by several authorities from various countries, as well as some of my Equens colleagues. With our EQ Magazine, we want to offer a platform for debate and exchange of ideas. This underlying principle is that we will only be able to take advantage of challenging times if we adopt an open innovation process and draw on each other’s strengths. At Equens, we have started a promising programme in this respect. But also in other areas, collaboration can bear fruit. This is reflected in the approach Finland and Estonia adopt towards SEPA compliance, as explained in inspiring interviews with our friends from OP-Pohjola and the Bank of Estonia. It is obvious that investment and management capacity are needed for compliance and innovation. The Dutch bank F. Van Lanschot Bankiers is an example of how such capacity can be created by adopting a fresh view on the old ‘make or buy’ question regarding core payment processing activities. That the market offers sufficient scope for following your own strategy is proven by the different ways Belgium and the Netherlands deal with today’s requirements regarding card payments, as is explained by the top representatives of the domestic card organisations. We are going through a period of accelerating change. The changes involved are both fundamental and exciting, as you can read in the interview with trendwatcher Peter Hinssen. At Equens, we are convinced that if we respond in the right way and collaborate on the relevant activities, we will be able to benefit fully from the wide range of opportunities the future of payments holds for us all. I wish you a pleasant and inspiring read, and if you have any questions or comments, please do not hesitate to contact me. Michel Stuijt, General Manager Market Management, Equens SE michel.stuijt@nl.equens.com

THE BULLS IN THE CHINA SHOP Trendwatcher Peter Hinssen states that we shouldn’t concentrate too much on payments themselves, as it is their context which is undergoing a radical change. Payments have become a commodity. Digital is the norm and technology is fading into the background.



R EPORT – FINLAND SEPA COMPLIANT

THE BLESSINGS OF A COLLECTIVE DECISION The Finnish decision to migrate to SEPA was made collectively by the entire banking, business, consumer and governmental community in Finland. What lessons can be learned from their National SEPA Forum? EQ visited OP-Pohjola in Finland and offers some interesting insights. COLOPHON

© Equens 2012. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of Equens.

PLUS



4 RECONSIDERING THE TRADITIONAL WAY OF WORKING IN PAYMENTS

As payment services become a commodity, margins keep declining. In an attempt to keep their margins up, many banks focus on the costs of their core payment-processing activities. But the real challenge is to develop new payment products that offer customers added value.

6 UNLEASHING THE CREATIVITY OF CLIENTS

Would it not be wonderful if we could unleash the creativity of our clients, our partners and industry experts? INTERVIEW – VAN LANSCHOT BANKIERS

LEADERS IN WEALTH PLANNING, FOLLOWERS IN PAYMENT PROCESSING General Manager Frans Mannaerts of Van Lanschot Bankiers explains why the bank focuses on its core activities of asset management & control for private individuals and institutional clients and outsources the processing of its payments.



8 SEPA AND THE SACRED COW OF SETTLEMENT SPEED

With the migration to SEPA, the Bank of Estonia had hoped to leave the retail payment activities to the commercial banks. However, under the current circumstances this would have implied a considerably reduced settlement speed.

10 CARTASI LAUNCHES SOCIAL MARKET PLACE

In  CartaSi organised an innovation contest across several industries. Combining the best proposals of some of the participants resulted in a new concept with several interesting features for consumers, merchants and CartaSi’s  banking partners under Gruppo ICBPI.

13 CLOSING THE GAPS FOR CYBER CRIME IN PAYMENTS

One of the major challenges in payments is combining maximum convenience with maximum security. Covenience is a matter of competitive differentation by service providers. Maximum security, however, is a matter of intensive cooperation between various stakeholders.

14 CARD PAYMENT SCHEMES: DOMESTIC OR GLOBAL?

Belgium and The Netherlands have made different decisions ont this important subject. What are their motives to respectively choose for continuing to develop the domestic card scheme, and seeking to join a global scheme? EQ Management Equens SE Esmée Burger Paul Jennekens Annemieke Lambregts Editors SPJ Financiële Communicatie Siebrand van der Ploeg Translation TechText bv

Concept and design Total Identity Sieds de Boer Julius van der Woude Photography Aatjan Renders Eva Persson, Hollandse Hoogte Kaupo Kikkas, Hollandse Hoogte Illustrations Julius van der Woude Markus Ölhafen

22 THE BUMPY ROAD TO MOBILE

It’s clear: with the tremendous market penetration speed of the smartphone, everything will move to mobile. And when the smartphone becomes life’s remote control, mobile payment will by necessity be integrated into the world’s mobile lifestyle.

27 COMPANY PROFILE & KEY FIGURES 2011 Company profi le and key figures Equens SE.

“FOR BANKS, THE FUTURE DOES NOT LIE IN CORE PAYMENT PROCESSING.” MICHA EL STEIN BACH CEO, EQUENS

RECONSIDERING THE TRADITIONAL WAY OF WORKING IN PAYMENTS

HOW TO MAKE PAYMENTS PAY As payment services become a commodity, margins keep declining. In an attempt to keep their margins up, many banks focus on the costs of their core payment-processing activities. But the real challenge is to develop new payment products that offer their customers added value. At Equens, we have ideas about how to create the right conditions in order for this to happen.

Resources for improved customer focus

For banks, the future does not lie in core paymentprocessing activities. Given all the concerns about advancing technology and standardisation requirements, this raises the question whether they should continue to focus on it. In addition, there are the many advantages and economies of scale that can be achieved by outsourcing the core payment processes – entirely or partly – to a party that is able to offer low prices due to its high processing volumes. This, in turn, frees up resources for improving customer focus and developing new products and services that immediately benefit the customer. In my view, the future lies in new products that create and reinforce relationships with customers. This is the most important condition for growth and improved margins, as I am sure that customers are willing to pay more for innovative services that will bring them convenience and added value. Initiatives are blossoming

Naturally, it is always necessary to examine possibilities for decreasing costs. But it is at least as important, and also far more satisfying, to increase margins with services that address the issue of convenience and bring added value to customers. This requires an external focus from payment departments, as well as innovative investments. Given the current climate, this sounds almost utopian. However, this is not the case, as outsourcing the core paymentprocessing activities will reduce costs and complexity, and at the same time free up resources for client focus and product development. Cost-cutting only brings temporary benefits

Despite growing transaction volumes, payment margins continue to drop. This is due to several factors. Customers are increasingly demanding, banks face the challenge of increasing regulation and standardisation, and have to invest in ever-advancing technologies. Furthermore, competition – also from non-banks – is increasing. When it comes to the traditional sources that yield the margins, the picture is also fairly bleak. Currently, payment margins consist of a combination of unprecedented low interest rates, spot dates only one business day from the trade date, and fees which have shrunk due to increasing price competition. Many banks seek relief by restructuring their core payment-processing activities and building their own payment hub. However, this requires investments which are only feasible with sufficient volume – and very few banks can play the volume game. Moreover, costcutting will only bring temporary and limited benefits.

The challenge for banks is to find out which services offer the most added value. Worldwide there are many blossoming initiatives. Take the many kinds of payment apps for smartphones, such as Bill Pal, which ensures that users pay their bills on time. Another example is Mint, which helps users with their monthly budgeting, Blueprint, meanwhile, by Chase Card Services, helps users manage their debts more effectively. A useful tool in the current economic climate is GasBuddy, which enables users to find the cheapest petrol station. For consumers in the US, there is ING Compare Me, which enables them to compare their savings and debts against those of similar consumers. A pure payment tool, on the other hand, is MoneySend by MasterCard, which enables private users to send money to each other via their smartphones. Then there are the tremendous possibilities mobile banking presents among the unbanked populations in developing countries, based on prepaid instruments. These instruments have already been available for a number of years in some developing countries: SMART Money and GCash in the Philippines, WIZZIT South Africa, and the economy-changing M-PESA in Kenya. In my view, these are interesting and inspiring examples directly or indirectly linked with payment services. Naturally, some ideas turn out to be no more than hypes, but this is inherent in creative processes. The main thing is that things get moving! 5

INNOVATION PROCESS AND SOUNDING BOARD

“THE FUTURE LIES IN NEW PRODUCTS THAT CREATE AND REINFORCE CUSTOMER RELATIONS.” MICHA EL STEIN BACH CEO, EQUENS

The two main challenges

Initiatives also show that banks all over the world are looking for new strategies. I only wish this development were quicker and the approach more comprehensive, as I think brand new banking concepts are necessary in order for future demand to be met. The challenge is twofold: first, creating conditions under which the necessary management attention and capital can be provided, and second, directly identifying the most promising direction. With respect to the first part of the challenge, Equens can help create these conditions by taking over the core paymentprocessing activities. For the second part of the challenge, we are doing preparatory work by setting up an Innovation Sounding Board with a group of clients, partners, European organisations and industry experts. The objective is to start a process of ‘open innovation’ with initiatives that have the highest probability of success (see next article).

UNLEASHING THE CREATIVITY OF CLIENTS “Would it not be wonderful if we could unleash the creativity of our clients, our partners and industry experts to make many new applications possible on our standard card and SEPA processing services?”, says Michael Salmony, Executive Adviser, Equens.

Customer-orientated and financially feasible

This combination of knowledge of customers’ needs in all possible market segments has already yielded a top fifteen of potential new services across the four paths of innovation that the payments industry is following: mobile payments via smartphones, e-commerce payments on the internet, business intelligence on payment data, and e-invoicing. Concrete ideas vary from remote mobile payments, the mobile phone as a POS, and e-Vouchers, to biometric authentication and an electronic mandate service. All these services are perceived as promising business cases. This is important, as there are also many ideas that sound highly innovative, but are too exotic to be financially feasible. After all, we are aiming to improve real margins in payments, aren’t we? This is exactly what the Innovation Sounding Board is about. It is a forum for discussing purely content-related matters, free from any internal political restraints. The participants – which include representatives of large banks – told us that this is the Board’s specific value. By discussing goals in groups, the participants are able to open their minds and determine which developments should and should not be given priority. The Board enables them to share their views, ideas, doubts and observations of trends, and make concrete proposals in ‘co-opetition’. As is the case with core payments, Equens can provide a common, shared, outsourced back end (e.g. for mobiles) for the innovation, with each bank offering a competing product in the market (with a different brand, pricing and functionality). The partners find this an exciting process, due to the wide range of disciplines involved. One participant even remarked that he truly believes the collaboration model is as important as the subject of innovation. I agree wholeheartedly! 6

Since users hacked the iPhone and forced Apple to establish the now hugely successful ‘App’ store and model, it has become clear that it is better for a company to be open, rather than try to maintain walled gardens and pretend that they can do everything themselves. The App stores – now successful not only with Apple, but also Windows, Nokia, Facebook, Android – show what amazing creativity is unleashed when an external community is allowed to develop solutions based on a standard infrastructure. This process is called ‘Open Innovation’. Radar

Being aware of these huge benefits, Equens has set up a process to harmonise, channel, funnel and prioritise the new innovation activities. These ideas are collected internally on our ‘radar’ of all possible topics. Than we have to prioritise the hundreds of gathered ideas into a list of good topics to be pursued.

LET IDEAS INTO BUSINESS MODEL INTERNAL IDEAS

EXTERNAL IDEAS

Criteria

In order to ensure that no single aspect dominated the discussion, an objective set of criteria on what makes a ‘good’ new service were established. Only if a potential new service is equally within our area of competence, has the potential to produce revenue, and will extend our value chain, thereby integrating us better into our customers’ solutions, will it rank highly in our evaluation. After many days of intensive cross-departmental discussions on how well the many potential new services on the radar ‘score’ with respect to the criteria, we emerged with a set of top innovations that all departments across the company jointly recommended for further development.

ALL IDEAS

LET OTHER INNOVATORS TAKE PART IN YOUR DEVELOPMENT EXPERTISE & BACKGROUND IN SOUNDING BOARD EXTERNAL RESEARCH

Sounding Board

In order to validate our internal findings with the outside world, we set up an Equens Innovation Sounding Board (EISB). The EISB consists of valued clients (ING, Rabobank, DZ BANK etc.), partners (e.g. SWIFT), European organisations and associations (e.g. ABI, EACB) and industry experts (e.g. the head of the European Commission’s eInvoicing Expert Group, a consultant with close links to PayPal/Amazon/ Google, a professor engaged in financial innovations), an ex-banker now close to the role-model automobile industry – and even a ‘sceptic’ to keep our new-world enthusiasm real. The EISB members were extremely positive about this new-style process (which we believe is an innovation in itself ), and also fully approved the top-priority list.

S.W.I.F.T. ABI

Commerzbank

Bank of America

INTERNAL PRIORITISATION

Rabobank

RPGC Group

IBI University

The European Association of Cooperative Banks UniCredit

ING

Automobile

Four streams

After this encouraging start, we explored the idea of ‘Open Innovation’ with this panel. We all felt that we should ‘dig down’ into a few of the top subjects together and see what concrete results we could come up with. Four streams were defined for this purpose: – Mobile payment (see separate article on the issue on page ) – E-commerce payment on the internet (a topic that is exploding!) – Business intelligence on payment data (which needs to be treated very sensitively but has absolutely massive potential) – E-invoicing (an invoice being the initiator of a payment). In each of these streams, interested parties from the EISB are working together with Equens to see if we can make something creative ‘happen’ in these areas.

Tieto

DZ BANK

UNRAE

MARKET DEVELOPMENTS

BUILDING NEW BUSINESS MODELS

eVoucher Business Intelligence eInvoicing (beyond VDS) Biometric Authentication

TOP 15 RESULTS

eMandate Mobile as POS

European online/web ePayment

Mobile Remote payments

EL. Mandate Service Track & Trace/mgtm Cockpit

mTopUp in Europe

eID

Payment/info/alerts via SMS PSP

Remittance Payments

New opportunities in market

BANK OF ESTONIA

SEPA AND THE SACRED COW OF SETTLEMENT SPEED Need for better cooperation between PSPs

With the migration to SEPA, the Bank of Estonia (BoE) had hoped to leave the retail payment activities to the commercial banks. However, under the current circumstances this would have implied a considerably reduced settlement speed.

Nõmmela stresses that BoE is playing the role of both a catalyst and coordinator in the preparations for SEPA. “The commercial banks and the Estonian Banking Association are in the lead. But when they invited European service providers to Estonia to support the migration to SEPA, Estonian banks came up with two or three different preferences. The differences were such that maintaining our current efficient settlement cycle appeared to be impossible. This underlines that there is a clear need for better cooperation between different SEPA retail payment service providers. These companies mustn’t see each other only as competitors, but also as partners by providing smooth-running channels between themselves.” In the procurement process, BoE has now assumed its coordinating role as a strategic partner which is able to provide the required functionalities. “The smaller and medium-sized banks are very happy that we are taking care of their wishes,” says Nõmmela. “But for the subsidiaries of the big foreign banks, it remains to be seen whether the outcome will be in line with their groups’ preferences.” Secure interbank payment system

“I wouldn’t call settlement speed a sacred cow directly. But after Estonia joined the euro area, it would have been hard to tell our population that it was good to join but that we now needed more time to settle payments”, explains Mihkel Nõmmela, Head of the Clearing and Settlement Department at BoE. As a result of this, BoE will continue to provide interbank retail payment services for the time being. This illustrates the challenge migrating to SEPA represents for a country with a relatively advanced payment infrastructure. “It is hard to sell when the number of settlements decreases from ten per day to one or two, or even to next-day settlement if a payment cannot find a good path between different SEPA service providers”, Nõmmela explains. 8

There are fourteen banks operating in Estonia. Most of them are subsidiaries and branches of large European banking groups. Four banks represent more than % of the payments market. The banks’ customers are used to modern methods of payment: approximately % of all bank payments are initiated electronically. Banks settle in-house payments in real time  hours a day, seven days a week. Interbank payments are settled over two systems, operated by the Central Bank: TARGET2 Estonia and ESTA. The latter was launched in  and settles retail payments in ten periods during TARGET2 working hours. This means everyday payments are settled in  to no more than  minutes. Nõmmela: “This is similar to the Equens cycle of nineteen periods.” In ESTA, payments are % guaranteed by paid-in cash collateral. Every batch of payments is checked immediately, and if the cash collateral is insufficient, it is rejected. When a batch is accepted, the positions of the banks are recalculated immediately. So when a payment is delivered, a bank can credit its customer without any liquidity or credit risk. Nõmmela: “We designed this procedure fifteen years ago, when the young Estonian banking community was facing some bankruptcies and other problems. We thought it would be better to isolate a bank with problems as quickly as possible so that other banks wouldn’t have to suffer.” Estonia joined the EU in . As of , banks started to offer SCT and SEPA card services. An intermediary solution for SDD will not be developed. The domestic direct debit will remain in use until the fi nal migration to SEPA. This product will need adaptation because the Estonian version has a different (creditor) mandate flow. Nõmmela: “This needs extra explanation and careful planning.”

“I HOPE THAT THERE WILL BE A GENERAL READINESS FOR CHANGE.” MIHK EL NÕMM ELA BANK OF ESTONIA

Cooperation between all stakeholders

Currently, only % of all domestic payments are SEPA payments. “So it is a real challenge to be ready for the end date in time”, says Nõmmela. “Today, only banks really understand what the change to SEPA means. But also companies and consumers will have to adapt. It will be especially challenging to convince consumers and small and medium-sized businesses to use IBAN in the future and adapt forms and invoices. Today, only % of all domestic payments use IBAN. In that respect, we believe that software providers, for instance of accounting software, are flexible and ready to support the change. But I hope that there will be a general readiness for change and that our legacy systems are not too much of a burden for us.” Nõmmela is fairly positive about the changes, provided that they yield clear benefits. “Estonians have a positive attitude towards technological innovations and new solutions, for which our country – with its population of only . million – is an excellent test field.” And BoE is actively encouraging cooperation between the various stakeholders. Together with the Ministry of Finance and the Estonian Banking Association, it has established the Estonian Payment Forum. In this Forum, which had its fi rst meeting this spring, all of the relevant stakeholder groups are represented. Furthermore, the SEPA action plan – now ready for the banking community – will be developed for all other relevant areas, and communication will be significantly intensified. Nõmmela: “We have deliberately named it Payment Forum and not SEPA forum, as we want to maintain it for the long run. SEPA is only one aspect of payment infrastructure, and we want this to be everybody’s business.” 9

“IT IS PUTTING TOGETHER THE CONCEPT OF A SOCIAL NETWORK AND THE CONCEPT OF OFFERING DEALS.” M A RIO PERINI CA RTASI

CROSS INDUSTRY INNOVATION IN ITALY

CARTASI LAUNCHES SOCIAL MARKET PLACE Round the beginning of this autumn, CartaSi will launch a new social market place in Italy. Schumpeter would have appreciated the innovation process, because it was really a question of making ‘neue Kombinationen’. In  CartaSi organised an innovation contest across several industries. This resulted in a new concept with interesting features for consumers, merchants and for CartaSi’s  banking partners under Gruppo ICBPI.

Combining social network and offering deals

CartaSi recognised the importance of cooperation with partners to ensure that innovations fulfi l market demand. Therefore it organised a contest for leading companies in various industries: mobile, media, internet software, but also publishers. As CartaSi services some  million cardholders and , merchants, the contest met with great enthusiasm and led to the participation of – among other – MicroSoft, Vodafone and Rizzoli, a leading Italian publisher. Perini: “All ideas raised were related to social commerce, so we decided to combine them into a new concept of a social market place and to continue with the four winners to explore the idea further. This has resulted in a mixture of social webs such as Facebook – very popular in Italy – and Twitter, TripAdviser-like sites and dealof-the-day websites like Groupon and Groupalia. We will not only offer special deals, but also the possibility to rate offers and to post comments and share experience. So it is putting together the concept of a social network and the concept of offering deals.” Really different

Mario Perini, VP of Marketing and Communications, is responsible for innovation at CartaSi. “A couple of years ago we realised we had to focus on innovation to have a better market proposition. After carrying out a couple of innovation projects, we set up a specific organisation within Marketing; Marketing Services and Innovation. At first we had an innovation department outside the operational business, but that did not work well, so we placed it within Marketing. It is much more effective to have innovation close to the daily operation and the medium term strategic issues with a horizon of one to two years, because you need operational involvement for feasible proposals.”

CartaSi is working mainly on its own customer base, which is huge with over % market share in the acquiring business. But also with existing websites that offers deals. Perini: “When we start, we obviously want to have a initial number of deals on offer.” The service will not only be available for CartaSi cardholders, but also for other cardholders and issuers, although CartaSi will be able to benefit from specific offers related to its loyalty programme, for instance earning extra bonus points for special advantages. “This, plus the rating possibilities and the social functionality are the main differences with existing sites”, explains Perini. 11

“THE SERVICE IS INTERESTING FOR MERCHANTS AS IT OFFERS THEM A HUGE POTENTIAL CUSTOMER BASE.” M A RIO PERINI CA RTASI

Extra value for cards services

“The service is interesting for merchants as it offers them a huge potential customer base”, continues Perini. “And we are considering to let our merchants make use of the comments and analyse the trends in them. Not only related to their own goods, but also what’s going on in other businesses. We also want to aggregate the data to marketing information and provide merchants with information they can develop their offering with. Also for banks there are clear benefits. The service is not only a tool to increase the usage of our cards online, but as CartaSi we are also providing a tool to the banks to produce extra value for their cards services. It leads to more loyal relationships between banks and merchants.” Discuss process and pricing with banks

To ensure continuous focus on the interests of its customer banks, CartaSi has begun organising a series of workshops for banks twice a year as a forum for discussion. Perini: “It is a very good way to interact. We usually present the banks with a new idea we want to develop. Then their views are discussed in round-tables and we summarise the outcomes to report them to all of the banks. In the workshops at the beginning of this summer, we will discuss the social marketplace and see how we can cooperate to get as many merchants on board as possible. Together with the banks, we will discuss the best process, as well as the best pricing.” In addition to the workshops, CartaSi has launched a professional website featuring new offers, interviews and discussions on the business of CartaSi. Banks can also post comments, so it is a kind of exclusive social network. 12

Professional customer care

The social market place concept is primarily developed for the Italian market. Having learned the lessons from comparable innovative concepts, CartaSi will focus strongly on customer service even if a product is not directly linked to it. After all, it has to keep up a reputation. Perini: “We will be an active endorser by providing our professional customer care. For instance customers have access to the market place via the CartaSi website and they can use a toll free number for inquiries.” When the concept works, CartaSi will need more international exposure and cooperation with other acquirers and issuers. Perini: “Then we’ll surely want to get in touch with customers of Equens’ to exchange ideas.”

ECTF

PROSECUTOR

police

CID

EQUENS

One of the major challenges in payments is combining maximum convenience with maximum security. Convenience is a matter of competitive differentiation by service providers. In the Netherlands, ensuring maximum security has taken shape in a unique Dutch model of publicprivate partnership between the police, the Public Prosecutions Department and Equens.

EUROPOL

CLOSING THE GAPS FOR CYBER CRIME IN PAYMENTS

National Skimming Point

Cyber crime is being monitored sharply in the Netherlands. Various advanced techniques are applied in order to prevent fraud and track down perpetrators. A vital tool of the public-private partnership in these activities is the National Skimming Point (Landelijk Skimming Point), which was set up at the end of . The purpose of the Skimming Point is to centralise all information on skimming (the illegal copying of cards) with the Dutch police. Apart from the police, the Public Prosecutions Department and Equens’ Fraud Control department are participating in the project on behalf of the banking industry. The expert team cooperates intensively with the Electronic Crimes TaskForce (ECTF) of the national police, the interregional bureau for money and value traffic, the criminal investigation department, and Europol. Equens has a natural coordinating role thanks to its knowledge and experience in the field of prevention and in rendering support to solve fraud cases. Knowledge platform

LSP

The National Skimming Point needs to develop into the central platform for sharing all knowledge concerning skimming. Consequently, for analytical purposes as much information as possible is being collected on skimming surveys. The National Skimming Point will also examine skimming cases to establish whether they have any connection with current investigations. Furthermore, the team will assess the possibility of criminal prosecution of groups of perpetrators. Finally, it will exchange information and expertise with counterparts abroad. According to the Director of Public Prosecutions, Marc van Nimwegen, collaboration and the sharing of information, methodology and knowledge are important success factors for a public-private approach. Combating cyber crime in payments is important due to the undermining nature of this criminal activity. Thanks to the National Skimming Point, the Public Prosecutions Department has a number of criminal investigations in progress into the activities of skimming groups.

“Sharing information is a necessary condition for effective cooperation and intelligent public-private action. Consolidation of expertise leads to enormous clout”, says Erik Akerboom, National Coordinator for Counterterrorism and Security. “The National Skimming Point is a good example of how banks, the police and Public Prosecutions Department are cooperating to ensure securer digital payments. It is also about consolidating information and expertise in order to make them available nationally and internationally. Accordingly, a results-orientated approach to cyber crime benefits from an effective network which enables the parties concerned to tackle problems jointly, preferably with private stakeholders who also possess extensive expertise. Another important reason is the fact that in critical situations many talk about taking action, but only a limited number of experts have the ability to actually to make a difference. For this reason, I don’t believe you necessarily have to have every capability in house. However, I do think you do need to organise things in such a way that you have those capabilities at your disposal when you need them.” Ralph Nagelkerke, Project Leader at LSP:“With the implementation of the National Skimming Point, the days when banks and the police and Public Prosecutions Department pointed the finger at one another have now permanently come to an end. Experience has taught us that publicprivate collaboration pays off. The mutual confidence this inspires forms the foundation for jointly and effectively combating new threats to payments posed by cyber crime in the future.” Through their Programme Against Cyber Crime, the Board of Police Chiefs, Public Prosecutions Department and banking industry have been working towards publicprivate combating of cyber crime in payments. In addition to the National Skimming Point, this has, among other things, yielded a long-term scientific research programme into this phenomenon. 13

CARD PAYMENT SCHEMES DOMESTIC OR GLOBAL?

Card payments are developing at a rapid pace. Systems need to be more secure, faster, cheaper and SEPA compliant. What is the best strategy? To continue developing the domestic card scheme, or seek to join a global scheme?

Were there any considerations in favour of switching to another scheme? If so, what were they?

De Ryck “Around  ‘scale’ was a genuine concern. Europe seemed to be well on the way towards replacing all of its ‘domestic’ schemes with a duopoly. Fortunately, people realised in time that in order for there to be true competition there have to be more players. Looking at the present landscape, Bancontact/Mister Cash, with more than  billion transactions, is sufficiently important and solid to play an important role.” What changes will there be for banks, merchants and consumers as a result of the changes?

Banks in Belgium have decided to make Bancontact/Mister Cash SEPA compliant. With  billion transactions, they believe the scheme is sufficiently relevant and solid to play an important role. After explosive growth and a record volume of . billion pin transactions, the Netherlands completely switched to the new debit card payment system with the brands Maestro and V PAY, based on the EMV (Europay/MasterCard/VISA) chip standard, as from  April . Two key players expressed their point of view: Kris De Ryck, CEO of Bancontact/Mister Cash in Belgium, and Piet Mallekoote, CEO of Currence in the Netherlands, owner of the domestic schemes PIN, Chipknip, Acceptgiro, Incasso/Machtigen and iDEAL.

De Ryck “In terms of infrastructure, the most important change is the evolution from the current single-processor setup to a multi-processor setup. Our clients – consumers and merchants – will not be affected by this. In the future, merchants will have more freedom in their choice of payment terminals, because of the use of the European standards (EMV, chip & PIN). Furthermore, increased competition among the different market players may result in a more diverse offering.” Does the fact that the ‘countries’ are now SEPA compliant mean that newcomers can enter the market? What do existing participants think of

What were the considerations in continuing to use Bancontact/Mister Cash, rather

this, and what do you think the outcome will be?

than switching to Maestro, V PAY or another international alternative?

De Ryck “We have noticed a lot of active interest in our project, and we are therefore hopeful for the future. The entry of new players will enhance the internal dynamics of the scheme and improve our competitive position.”

De Ryck “Bancontact/Mister Cash is an excellent product in terms of functionality and efficiency. This is confirmed by cardholders as well as by merchants. In the early days of SEPA, there was the valid issue of whether Bancontact/Mister Cash could remain competitive in terms of scale. Now, several years later, we have thoroughly reassessed the market and updated our business case. This has clearly shown that the Bancontact/Mister Cash scheme is perfectly equipped to absorb the SEPA investments without impairing our strong competitiveness. There is therefore no economic reason to withdraw the scheme from the market. Nor is security. Bancontact/Mister Cash has always been ‘chip & PIN’ with a security level that is equivalent to EMV.” Which parties were involved in the decision to make the scheme SEPA compliant, and how was the decision ultimately made?

De Ryck “Two years ago, the shareholders of Bancontact/Mister Cash reviewed the SEPA case. Prior to this, all of the stakeholders (issuers – acquirers – merchants) were consulted. After careful consideration, in early  the decision was made within regular governance to make the scheme SEPA compliant.” 14

New participants often have other working methods and use other processors. What are people’s views in this respect in terms of stability and continuity, and what actions are being taken to manage this?

De Ryck“Bancontact/Mister Cash is all about reliability and stability. We do not want to make any concessions in this respect. The strict conditions and rules of admission are and will remain strict. We cannot afford any experiments. Our clients expect Bancontact/Mister Cash to continue to look after their money in the future.”

What is the role of Currence in the switching process?

Mallekoote “Currence was the owner of the PIN brand in the Netherlands. In that capacity, the banks have asked us to manage the migration process from PIN to EMV (Maestro and VPay) as their facilitator.” What was the reason for the banks to switch to EMV?

DOMESTIC

GLOBAL

Mallekoote “Despite two billion transactions and continued growth, the banks believed the Dutch market was too small for investments in new applications and PIN security. The main advantage of switching to EMV is that it allows them to benefit from the innovation and technology of MasterCard and VISA. Even in countries with much larger payment volumes than the Netherlands, there were doubts as to whether a domestic scheme would be viable in the long term.” What does the retail market think of the switch?

Mallekoote “Initially, retailers were worried, mainly due to the fear of cost increases. But in , the banks and the retailers concluded a covenant on the switch to EMV. Some businesses already had a contract for Maestro or VISA. The agreement was made that, irrespective of the brand, the rates and conditions would remain the same for a minimum of five years. Additionally, retailers would retain a  cent discount. In return, they would commit to meeting the deadlines of the new debit card payment system. At that point, banks were able to make the final decision to switch to the new system.” What consequences did the switch to EMV have?

Mallekoote “It involved two migrations: from strip to chip and the renewal of the agreements. The EMV project was completed within a year. It all went so well because replacement of the  million cards and , terminals had already begun in . Prior to this, Currence had been working for several years to ensure that businesses would, at the end of the life cycle of a POS terminal, switch to a new, EMV-based equivalent. In other cases, businesses were encouraged to purchase a new system earlier by being offered a discount. As a result, on % of terminals the software can be updated remotely. These changes were implemented around the summer of . Additionally, the banks had a busy time last year renewing approximately , contracts. The public was informed by promotional material and campaigns, and quickly got used to the new debit card payment system.” What will the role of Currence or Betaalvereniging Nederland be after the migration to Maestro and V PAY?

Mallekoote “Our role is, amongst other things, to ensure that the payments chain remains operational. We perform common, noncommercial duties in the area of communication, fraud prevention and infrastructure. This role of facilitator and coordinator between stakeholders, including newcomers, has been assigned to the recently established Betaalvereniging Nederland. Betaalvereniging Nederland has therefore taken over the responsibilities of Currence with regard to debit card payments.” 15

“SO WHEREAS WE THOUGHT THE PAYMENTS MARKET HAD SLOWED DOWN SOMEWHAT, THIS IS ACTUALLY A VERY EXCITING AND INTERESTING PERIOD!” PETER HINSSEN ACROSS GROUP

TRADITIONAL PAYMENTS VERSUS RADICAL CHANGE

THE BULLS IN THE CHINA SHOP We shouldn’t concentrate too much on payments themselves, as it is their context which is changing radically. Digital is the norm, technology is fading into the background. New market parties in particular are running through traditional payments like a bull in a china shop. What changes are merchants

“I feel the market is very much on the move and that all the movement at the forefront could revolutionise the industry, with the entry of many new market parties and the creation of a large number of opportunities. The ironic thing is that merchants thought there would be a decrease in the number of currencies. They expected consolidation, which only the two or three strongest players would survive. But the number of currencies is actually on the increase, thanks to new innovations such as Facebook Credits. The more traditional merchants are critical, and wonder what they should do with all of these new products. By contrast, new merchants run at them like a bull in a china shop. So whereas we thought the payments market had slowed down somewhat, this is actually a very exciting and interesting period!”

noticing in payments?

Interview with Peter Hinssen ( ( ), entrepreneur, adviser, lecturer and writer of The New Normal and Business/IT Fusion. One of Europe’s most sought-after thought leaders on the impact of technology on society and business, Peter Hinssen is co-founder of Across Group, a Belgian based consultancy firm.

How are they responding

“Many merchants would prefer to keep things more or less the same. They are already faced with so many things they have to adapt to, but they do not have the right to hold back change. It is the will of the consumer. There are also merchants who embrace the changes as an opportunity to adopt an entirely different approach. One example is Tesco, the fast-growing British supermarket chain. Previously, Tesco had a joint venture with the Royal Bank of Scotland. In the wake of the crisis, Tesco became the sole owner and has renamed the company Tesco Bank. As a retailer, they knew – thanks to the purchasing behaviour of their clientele, the online shop and the loyalty card scheme – exactly what their customers would want to buy. Consequently, they now also know what customers have the means to buy, and can inform them about those products. Tesco is even considering establishing its own currency. This way, they will play an even more important role in the purchasing behaviour of their customers than they already do.” to the changes?

What does this mean

“Tesco has an extremely broad range of products, ranging from bicycles to groceries and insurance. The major difference compared with the past, however, is the new approach to business. Nowadays it is considered ‘old-school’ to try to integrate components and systems, such as the supply chain, accounting and POS systems. There is a shift towards the integration of customer information, based around customer centricity. The rest is experience. Tesco has set up two pilot stores in order to test the full range of technologies, from pre- and post-shopping connectivity to in-store advertising and payments. The underlying philosophy is to give the customer the feeling that they are receiving a fully personalised service. Web traders have already perfected this. In the coming years, this change is also going to manifest itself in actual store environments. Payments need to be integrated into these adapted environments in a non-intrusive manner.” for consumers?

How can small-scale merchants remain afloat in this storm of

“Naturally, these are highly sophisticated procedures. They involve large investments that demand certain economies of scale that small-scale merchants cannot afford. This, however, is not necessary. Small-scale merchants will try to enhance their relevance by focusing on human contact, such as premium value. For certain segments, speed and convenience will also be important factors. Take, for instance, newsagents and kiosks at railway stations. For boutiques in provincial towns, however, this is much less important. Payments are transactional and consist of facets that can be optimised, simplified and accelerated. Integration with mobile payments is also becoming an important part of this change. Incidentally, the limited success of mobile payments thus far is, in my opinion, a generation issue. As part of her upbringing, we’re trying to teach our thirteen-year-old daughter how to use a debit card. Our generation finds this easy, but she is not interested, as she thinks she should be able to do it using her iPhone.”

technological changes?

So the customer

“Yes, and a lot of headway is being made. Personally speaking, I really admire PayPal. After coming out of nowhere only ten years ago, they were laughed at by the banks following the takeover by eBay, but they’re now one of the top five financial service providers. Naturally, in the US they are able to take advantage of the large gap in the market created by the lack of development in payment transfers. In Europe, we of course enjoy the benefits of home banking and the efficiency generated by SEPA. We would be blind if we failed to recognise a gap in our approach that could be filled by a newcomer. PayPal, for instance, are heavily promoting mobile banking, whereas banks are showing little interest; for them, the main priority is customer loyalty. By way of another example, a retired banker told me about a data center he set up  years ago. With all of its equipment and  staff, the processing capacity of the center at that time was a quarter of that of his current iPhone. We still associate payments with a heavy infrastructure. But take Square with its app and miniature credit card reader, which you can plug into your smartphone or tablet and

really has the final say!

“THIS CREATES A WHOLE DIFFERENT WORLD, IN WHICH PAYMENTS ARE NOT TRANSACTIONAL, BUT INFORMATIONAL.” PETER HINSSEN ACROSS GROUP

be your own merchant – it’s magnificent in its simplicity. At the moment, it is still only an enabler for credit cards, but we should perhaps ask ourselves if plastic is still the ideal means of accessing our money. If you were to put Square in a Facebook-type community, the world would suddenly be a very different place!” “It would be wrong to view payments outside of their broader context, as there is a highly interesting development in progress. On the one hand, merchants are zooming in on their customers, but on the other, customers want a better insight into their expenditure. They want to know what they are paying and what for. Imagine – and this is entirely possible – if one of those customers were to want to share this knowledge. Not with everyone, but with friends who tell each other why they purchased items in a certain shop, only to find out that they paid too much because another shop is cheaper. This creates a whole different world, in which payments are not transactional, but informational. People share all manner of things with one another – photos, experiences, purchases, where and what they eat – so why would they not tell each other what they spend their money on?”

Payments as social media?

This creates new opportunities,

“Yes, old marketing principles are being turned on their head. Traditionally, merchants adopt the funnel principle. In other words, you start big with a large population, which you push through the funnel by means of a wide variety of promotion. In this way, this group is narrowed down to qualified prospects before the eventual moment of truth – the purchase. But these days, things only start after the moment of truth for the consumer. Naturally, they investigate the various options thoroughly before making a purchase, but it is only afterwards that they properly discuss it. A perfect example of this is a survey conducted in the cosmetics industry. From the survey, it emerged that consumers spend even more time discussing their purchase online than they do investigating the various options beforehand. This establishes a positive flow of feedback providing extensive information which can also be extremely useful to merchants.”

but also new challenges!

What new role can

“If you look at the development of payments, it is, among other things, regrettable that it is not coupled to the flow of information. Whilst a record containing interesting information is made of every payment, this information is never used. This is an unbelievable waste. Take the purchase receipts from a large furniture chain. Despite the useful information printed on them, after three months the ink is unreadable. It would otherwise be easy for the customer to order an additional shelf for the cupboard they have purchased, or replace a broken chair leg. Wouldn’t it therefore make sense for the merchant to provide a service to the customer by keeping a record of the receipts? As a payment service provider, you would be almost blind not to see this! There are countless possibilities in the digital world to interconnect things much more cleverly. So don’t concentrate too much on payments, but focus on the changing context!”

payments play in this?

VAN LANSCHOT OUTSOURCES PAYMENTS

LEADERS IN WEALTH PLANNING FOLLOWERS IN PAYMENT PROCESSING

The Dutch private bank Van Lanschot has decided to outsource the processing of its payments. “We want to free up capacity in order to be able to focus on our core activities of wealth planning and asset management for private individuals and institutional clients”, says General Manager Frans Mannaerts. “When it comes to payment processing, we are followers. We expect Equens to be able to fulfi l this role well.”

Established  years ago, Van Lanschot is the oldest independent bank in the Netherlands. From its offices in the Netherlands, Belgium and Switzerland, it serves entrepreneurs and wealthy private individuals with freely investible assets of euro , or more. In terms of product development, Van Lanschot focuses primarily on wealth planning. Mannaerts, who is also responsible for Payment Processing and Facility Management: “We want to distinguish ourselves in this area, but with payment processing we want to remain close behind the leaders. This means we also need to offer innovative online services and mobile and contactless payments. We expect Equens to keep us abreast of the market.”

“PAYMENT PROCESSING HAS ONE OF THE HIGHEST BULWARKS.” FR ANS M ANNA ERTS VAN LANSCHOT

Highest bulwark

“Our clients expect us to provide them with a full-service concept. Accordingly, we provide a complete package for both the business and private market. With their current accounts, private customers control their assets and have access to their stocks and shares. For our business banking clients, smooth payment processing may even be more important. We provide them with services such as collection, giro collection forms, point-of-sale terminals and an advanced online banking package with a layered authorisation structure. Combined, this amounts to approximately  million transactions a year. Our clients need to be assured that everything will work flawlessly. Of all our activities, payment processing therefore has one of the highest bulwarks. In this respect, Equens needs to guarantee us maximum security.” A close relationship with clients

For Van Lanschot, payment processing is an essential part of maintaining an up-to-date profi le of its clientele. The bank also offers payment packages tailored to specific groups of clients, such as business professionals. As a private bank, its added value lies in its service. Mannaerts: “Our scale means that there are short lines of communication between our front and back office. The staff have a close relationship with our clients, and assess matters independently. For instance, recently one of our back-office employees received a payment order which he correctly deemed important. In order to obtain approval, he needed to contact the relationship manager. However, the relationship manager was out with a client. To solve the problem, he went and collected the approval from the relationship manager in person. This is of course unusual, but typifies our culture.” Entries and approvals in-house

In order to preserve this culture, Van Lanschot has not opted for traditional business process outsourcing. Mannaerts: “We are going to have our own people use Equens’ processes and systems, but we will continue to do the entries and approvals ourselves. This also applies for the account administration and statements. After all, in addition to current accounts clients have savings accounts and stock accounts. Irrespective of the importance of having a comprehensive profile of our clients, we want their statements from Van Lanschot to be as recognisable as possible to them. Once the outsourcing process has been completed, when a client logs into their Van Lanschot portal to make an electronic payment, they must be automatically redirected to the system at Equens. This is where the processing and clearing & settlement will take place, while we take care of the approvals and client reporting.”

No further transfers of activities

For Van Lanschot, outsourcing is an obvious choice, because remaining up to date requires extensive knowledge of schemes, protocols and so forth. “Such knowledge is scarce”, admits Mannaerts. “It would demand too much of our attention, as well as investments we would prefer to make elsewhere. Equens has the expertise and the scale, so it makes much more sense to outsource these activities to them. What’s more, we have many years of experience of Equens as a CSM. They have a proven track record with SEPA and crossborder payments. These criteria were an important part of the selection process for a reliable and fully certified partner. Naturally, we had a variety of parties to choose from for processing and clearing & settlement, but partly from a risk point of view we wanted to avoid further transfers of activities during the process.” Requirements for outsourcing

Naturally, Van Lanschot expects a consummate operational performance from the outsourcing partner. Mannaerts: “Moreover, they must closely follow the European legislation and apply it to their operations. With a party like Equens, we should even be able to expect that they have an influence on the European legislation. We also think Equens should be leaders in security and the prevention and combating of fraud. Clearing houses are the junction where payment flows meet. Accordingly, they are where payments should be monitored to establish whether they are compliant with the various legislation governing sanction screening and other practices. Last but not least, Equens must be prepared to invest in new technologies, which will enable us to rapidly bring new payment products onto the market. It is good to have a partner who is a leader in each of these areas.” 21

THE BUMPY ROAD TO MOBILE With the tremendous market penetration speed of the smartphone, everything will clearly move to mobile. And when the smartphone becomes life’s remote control for everything from entertainment to communication and business, mobile payment will by necessity be integrated into the world’s mobile lifestyle and experience.

While smartphones already enable users to carry their bank around in their pockets or handbags, initiatives aimed at replacing cash with mobile payments still meet with mixed success. Two examples by Michael Salmony, Executive Adviser, Equens.

Not even in Japan

Much is expected from the advanced contactless technology NFC (Near Field Communication). In , a new NFC pilot was started every other day somewhere in the world. However, solutions have only met with limited commercial success. Some believe that the Japanese NTT DoCoMo’s Osaifu-Keitai is a living example of the multi-functional model of the future, since it combines NFC technology with smartphones in a region where the population is very technologically aware, and where there is significant cash to be displaced. But although the functions are impressive, and the number of devices and terminals is huge, with . contactless retail transactions per month per end-user device or . transactions per day per POS, it is not a success story. It is easy to explain why. The hassle of downloading, configuring and activating applications, holding the phone the right way round, pushing the appropriate menu buttons, simply in order to pay for a can of Coke, stands in no relationship to the simple act of taking a contactless smart card and holding it in front of the vending machine. Thus, also in the advanced Japanese arena, mobile payments will only be commercially successful with a solution that is convincingly better than what was available before, and when there is a convincing business case for all stakeholders.

Mobile NFC

‘Everyone is a Merchant’

But employing some out of-the-box creativity, convincing new solutions may be possible. Consider, for example, turning the classic NFC model – a card embedded in a phone to be touched on a contactless POS terminal – on its head. Using a mobile phone as a card terminal instead of a contactless card opens up a huge new market of ‘merchants’ who previously had no cheap and easy means of accepting card payments: flower shops, corner shops, plumbers, market stalls, taxis, tour guides, repay friends. Just as the success of PayPal was largely based on allowing anyone to accept card payments online (‘Everyone is a Merchant’), so will this mobile solution allow anyone to accept cards in the real world. In the US, Square offers a hugely successful solution, but only with magnetic stripe cards; here in Europe, we are beginning to see similar solutions (e.g. iZettle) for EMV-compliant chip-based cards. The convenient, cheap and paradigm-changing revolution of accepting physical card payments on a normal smartphone has a huge potential to displace cash payments in the largest section of the European economy, that of the small and private merchant. Thus, the door to phone-based card acceptance by everybody – and severe competition to banks’ card business – is almost open.

Google Wallet and POS terminal

PayPal card reader

iZettle EMV-compliant chip-based cards reader

“IN FINLAND IT IS A DEEPLY ROOTED PRACTICE TO MAKE PAYMENTS IN DUE TIME.” PETRI A A LTO OP-POHJOLA

FINLAND SEPA COMPLIANT

THE BLESSINGS OF A COLLECTIVE DECISION For other euro countries, the migration to SEPA in Finland must be a source of envy. The decision to migrate was made collectively as early as , resulting in SEPA compliance at the end of November . OP-Pohjola is a Finnish financial services group that serves over four million customers. It provides its corporate and institutional customers with a diverse range of banking, non-life insurance and asset management services, and private individuals with an extensive range of non-life insurance and private banking services.

Software providers played a central supporting role in the standardisation process and other technicalities. The process greatly enhanced the mutual understanding between all of the parties involved, resulting in the establishment of a Finnish National SEPA Forum. Each of the parties was represented in the forum, which convened monthly. “I would recommend all other countries to do the same, and as early as possible”, says Petri Aalto(right), Vice President of Payments & Cards at OP-Pohjola Group. Together with his colleague Jussi Snellman (left), Vice President of Cash Management, he was actively involved in the entire migration process. SDD traffic is % cross-border

“In Finland, the software providers traditionally have a very active role in payments”, says Aalto. “Thanks to that, we had had very clearly defined national standards for quite some time. So we had a fi rm foundation from which to move on to new standards.” All credit transfers in Finland are now % SEPA compliant. Although the SCT Rulebook only concerns the bank-to-bank sphere, OP-Pohjola has extended it to corporates. They are now able to deliver their payments in ISO  format. For SDD, the country has fulfi lled all of the requirements on the debtor side. Aalto: “It is now up to the creditor banks to start using SDD, but volumes are still very low because all banks still offer domestic products. SDD traffic is % cross-border.” Automated e-Invoicing offers a much-utilised alternative for domestic direct debit, which accounts for less than % of all non-cash payments. Snellman: “Because of the combination of SCT and e-invoicing, there is less urgency to replace direct debit with a version of SDD for domestic use. Also, according to the Finnish national migration plan, domestic DD will primarily be replaced not by SDD, but by services utilising SCT and e-invoicing, tailored to also suit customers not using internet banking.” 25

“FOR A SUCCESSFUL MIGRATION PROCESS, IT IS ESSENTIAL TO HAVE EXTENSIVE TECHNICAL KNOWLEDGE ABOUT YOUR CUSTOMER.” PETRI A ALTO OP-POHJOLA

Additional optional services

Thanks to the participation of all of the various user groups and software providers in the migration process, there is no loss of functionality. There are even two Additional Optional Services (AOSs). Aalto: “In Finland, it is a deeply rooted practice to make payments in due time. Therefore a payment date function has been added to SCT. The second AOS is enhanced remittance information. So . percent of all functionality is available in SEPA, and for some customers even a little more.” Surprisingly few questions on IBAN

For consumers, the actual migration was very easy. Aalto: “The vast majority are fully accustomed to internet banking, so they only had to familiarise themselves with the use of IBAN, which was used alongside the old BBAN in internet banking applications and account statements. Even when the longer IBAN was introduced, we received surprisingly few questions. The difference isn’t that big anyway, because Finnish national bank account numbers consist of fourteen characters, while the new IBAN consists of eighteen. Moreover, as banks we have made sure that there are very few instances in which you have to remember your bank account number. With e-invoices and paper invoices, you don’t have to worry about it at all, as the number is stated on them. And since , it has been compulsory to provide your IBAN to government benefits agencies like the Social Insurance Institution of Finland (KELA).” Critical eye on processing before migrating

For the corporate customers, the changes were more pronounced, especially in relation to card payments. Merchants had to upgrade their terminals and were confronted with a different fee structure. Aalto: “Actually, the latter created the single most heated debate within the SEPA Forum.” Technically, the migration process was completed without any major problems. A help desk provided support for all kinds of questions, and testing facilities were made available for the large corporate customers and the software providers. Snellman: “One of the messages we tried to hammer home throughout the process – especially for corporate customers – was to examine their own processing and software systems with a critical eye before the migration. Many companies took this message very seriously and, in my view, they are the ones that got the most out of it. They are in a much better position to utilise the converted product and benefit from more streamlined processing.” 26

More bandwidth required

“For a successful migration process, it is essential for a bank to have as much as technical knowledge about your customer as possible”, stresses Aalto. “Know what software they are using, how their internal processes are organised, and how they are linked with your banking systems. You cannot start early enough with gathering this information.” Another lesson learned was the necessity to have the technical capabilities in order. Snellman: “It is very important for banks and clearing houses to look at the process change very carefully. SCTs require more capacity in terms of bandwidth. In the beginning, we didn’t foresee this and experienced a couple of bottlenecks. With the end date of February  approaching, the number of SCTs will increase tremendously. This will be a major test for the whole infrastructure, and should not be underestimated.”

Company Profile & Key Figures 2011 Key Figures 2011 Transactions

9.9 billion payments processed 4.1 billion ATM and POS transactions Pro-forma, including 100% of Equens S.p.A. transactions and full year montrada GmbH transactions.

Terminals and Cards

21,000 ATMs connected 799,000 POS terminals connected 60 million credit and debit cards under management Consolidated key figures

Revenue 372,094,000 Results 25,307,000 Net profit 19,433,000 Figures as of 31 December 2011

Other figures

12.5 % market share in Europe 1,505 staff Full-time equivalents in absolute numbers as on 31 December 2011 including all fully owned subsidiaries.

Subsidiaries (all fully owned) With clients and partnerships in multiple European countries, we offer pan-European market coverage from offices in five countries – the Netherlands, Germany, Italy, Finland and United Kingdom. Furthermore, we have a strateg ic partnership with the Federal Reserve Banks in the United States for the processing of intercontinental payments. Equens was established in 2006 as Europe’s first panEuropean payment processor. This followed the merger of Europe’s two large payment processors: the Dutch Interpay Nederland B.V., and the German Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG. Initially operating as a holding company, Equens was formed in July 2008 as Europe’s first Societas Europaea payment processor. The company extended its geographical coverage in the Mediterranean region through the establishment of Equens S.p.A. Our activities in a nutshell Get ready for SEPA Enjoy the benefits, outsource the challenges The European payments market calls for card and payment processors with a pan-European vision. Equens supports the development of SEPA and is the outsourcing partner for a fastgrowing number of European banks that appreciate our knowledge of local markets. We are transforming your domestic payments into SEPA payments, processing SEPA transactions at a competitive price, and developing additional services in order to maintain and upgrade current service levels. Smart sourcing Outsourcing the right processes at the right time With over forty years of experience in the cards and payments industries, a complete service portfolio, expertise in the interbank and intrabank environments, local and European expertise and clients throughout Europe, we can be your smart sourcing partner. Smart sourcing: where your needs and our expertise in payment processing meet.

In the Netherlands PaySquare B.V. is one of the Benelux’s largest acquirers of MasterCard, Visa, JCB, China UnionPay, Maestro and American Express payments. InterEGI B.V. issues Prepaid Chipknip cards in the Netherlands.

In Germany DZ Service GmbH is a service provider for payment transactions and document processing. Providing transaction and business process outsourcing services to more than 400 banks, DZ Service is one of the major service providers in this segment. montrada GmbH is a fullservice acquirer and network service provider of consultancy services, terminal installations and customer support.

In Italy Equens S.p.A. is Italy’s primary provider of end-to-end issuing, acquiring and payment processing services.

Strong foothold in Europe Equens Head Office Equens SE Office Countries with clients Countries with CSM partners Countries with clients & CSM partners Other EU countries

Many possibilities, one processing partner Make the most of your next-generation payments New markets and new technologies lead to rapid developments in the field of m-commerce, e-commerce, contactless payments and biometrics. Equens has in-depth knowledge of, and vast experience in, the processing of new types of payments. We can advise and support you – from the design phase to the permanent integration within your existing processing environment.

SEPA Outsource your processing to a solid partner

The Single Euro Payments Area offers you all the benefits of an open European market. But first you will have to get ready for the end date. That means getting to know the SEPA rulebooks, allocating time and resources for the migration, and developing new SEPA-proof services. By outsourcing SEPA processing to a dedicated and experienced partner, you can enjoy the benefits while outsourcing the challenges. Equens is this outsourcing

Sound solutions, solid results

partner for a fast-growing number of European banks that appreciate our knowledge of local markets. We are transforming their domestic payments into SEPA payments, processing their SEPA transactions at a competitive price, and developing additional services in order to maintain and upgrade current service levels. Outsourcing your SEPA processing by insourcing Equens could definitely be an attractive option for you.